Analysis And Recommendations : My Doll Clothing And Design Your Own Doll
As we know Emily Harris, the Vice president of New Heritage Doll Company production division, must choose between proposing Match My Doll Clothing and Design Your Own Doll to the capital budgeting committee. While Match My Doll Clothing would consist of matching all season clothing line for pre-teens and their favorite dolls, Design Your Own Doll would utilize new web-based software to let user customize a doll’s feature to their preference. However, both project proposal has different overhead costs and have different requirements for implementation.
Match My Doll Clothing contained relatively large outlays for R&D of $625,000, market research of $625,000, and require investment in Working Capital of $800,000 and Property, Plant, and Equipment of $1,470,000. The R&D and marketing expenditures would be deductible for tax purposes at New Heritage’s 40% corporate tax rate. The property, plant and equipment was expected to have a useful life of 10 years; the associated depreciation charges are based on MACRS. Because of the proven success of MMDC, Harris believed the project entailed moderate risk which is the same degree of risk as the production division’s existing business.
Design Your Own Doll’s customization process requires proprietary design software to enable the customer to select physical attributes of the doll. The web-based software tools and order entry system required New Heritage to make significant modifications to its existing…